Get HIP: the demolition of heartbreak house

Sam Dunn looks forward to the day when the sellers' packs become law - and, it is hoped, deals won't be dashed at the death by gazumpers and critical surveys
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The Independent Online

For once, interest rates have taken a back seat in the ferocious debate about the future of the UK housing market.

For once, interest rates have taken a back seat in the ferocious debate about the future of the UK housing market.

Instead, the hot topic is the home sellers' packs - or Home Information Packs (HIPs), to give them their official name - which will probably become compulsory within the next three years.

Members of both the House of Commons and the Lords sparred over proposals for the packs last week as the Government's Housing Bill rattled through Parliament.

The Lords upped the ante with an amendment to make them voluntary - a move then vehemently rejected by MPs. The legislation now goes back to the peers for another vote, set for this Tuesday.

Political ping-pong between the two chambers highlights how important the changes will be. Brimming with information about your home, sellers' packs are intended to speed up the often painfully slow process of completing a property transaction, make things more transparent and remove uncertainties that can break buyers' wallets - and their hearts.

At present, potential buyers make an offer before embarking on surveys, and it can take an average of 10 weeks between an offer being accepted and contracts being exchanged. That's a lot of time for events to take a turn for the worse, says Jane Pridgeon of Halifax Estate Agents.

"Conveyancing is so slow at the moment. Getting everybody to use sellers' packs would mean people could exchange contracts a lot quicker."

A quarter of all transactions fall through in Britain, costing disappointed house hunters over £300m a year, according to recent government figures.

For example, gazumping - where buyers find their offer has been rejected at the last minute because the vendor has accepted a higher rival bid - leaves the frustrated would-be buyer with bills for hundreds of pounds for wasted surveys and solicitors' fees. And often, buyers themselves will pull out late in the selling process after surveys have uncovered costly defects. Both these issues would be addressed if the home-buying process was less drawn out.

Widely acknowledged as shifting power away from property vendors to buyers, HIPs are expected to cost about £600 and will provide comprehensive legal and survey information before any offer is made.

In particular, a home condition report (HCR) within the pack will detail how energy efficient the property is and highlight any safety issues and structural problems such as subsidence.

While sellers may not like paying for all this upfront, they will themselves, of course, be spared the cost of commissioning a survey when they buy their next home.

If the Government's proposals go through, it will become illegal to market your home without such a pack. A compensation scheme is likely to be set up for complainants.

Given these anticipated benefits, you might expect criticism to be muted. Not so - arguments against the packs include concerns that they will be too expensive for many, go out of date quickly and be undermined by people continuing to commission their own surveys. It has also been suggested that they might be a costly waste of time in flat property markets where there are few buyers.

As a result, the Lords has advocated a voluntary system, one cautiously backed by the National Association of Estate Agents. (NAEA). But consumer bodies like Which? and even big estate agents like Halifax disagree. A voluntary system wouldn't work at all, says Ms Pridgeon. "If you have a chain of five buyers and sellers but one without a sellers' pack, it makes it a waste of money for the four who have done so [to speed things up]."

The new transparency will be a revelation, says Emma Harrison at Which?. "For most people, it's the most important transaction of their life. Yet you can get more information when buying a £50 DVD player."

Although many voluntary HIP schemes have been piloted across the UK during the past five years - and some are still continuing - Which? would like to see a compulsory trial scheme applied nationwide by estate agents.

The real beneficiaries would be first-time buyers, adds Ms Pridgeon, since all the survey costs would be borne by sellers. These buyers are crucial to the health of the housing market but they have shrunk as a percentage of new loans because house-price inflation has lifted the first rung of the property ladder out of their reach.

Chris Hall, president-elect of the NAEA, acknowledges the new system could help first- timers and admits the current system "could be speeded up".

But the organisation would prefer a less rigid, voluntary process and is unhappy that owners will have to put together packs before they can even test the waters by putting their homes on the market.

"With 40,000 homes up for sale each week, they have to get it right. One hiccup could cause chaos," says Mr Hall.

Plenty of checks and balances are planned: a proposed 7,000 inspectors will compile the HIP surveys, all needing training and a licence. But details on house-data security remain scant. "There is still a lot of work to do. The problem is that nobody is investing any money yet, since nothing is mandatory," says Ms Pridgeon.

The packs will probably be stored electronically, with details printed out, and local authority searches should be conducted online to allow cheap, regular updates. But some lawyers have expressed concern that too much information about a property will be available in estate agencies, letting people view details, such as home security, that could put a house at risk.

SPEEDY SALE

Darren Hughes, 28, a management consultant from Bristol, was taken by surprise at the speed of his house sale.

"Using a sellers' pack really cut the time - it took just three weeks to exchange contracts after an offer was made. In such a competitive market, I felt it really made a difference."

He used M Coleman, a Bristol estate agent that voluntarily offers sellers' packs, to sell his three-bedroom semi-detached home in the city centre.

"I found that the majority of buyers liked the pack, although there was definitely a minority who didn't."

This was down to a lack of trust and understanding, he believes.

Darren paid for the pack by giving the estate agent 1.7 per cent commission - 0.2 per cent above the usual fee.

DEALS AT THE DOUBLE: WHAT DOCUMENTS WILL VENDORS HAVE TO DISCLOSE?

Full details have yet to be confirmed, but the following will probably be necessary in Home Information Packs:

  • A draft copy of the contract/terms of sale, to show buyers what they are getting.
  • Evidence of title deeds. You'll need proof that you are the current owner of the property.
  • Replies to standard preliminary enquiries made on behalf of buyers - covering such issues as drainage and flood risk.
  • Copies of documents showing that planning consent has been granted for any work requiring this. For example, buyers will want to see that a conservatory has been erected in accordance with building regulations.
  • Copies of warranties and guarantees for work done.
  • Replies to local authority searches. You might discover, say, that a planning application has been lodged for a children's playground in your area.
  • A home condition report, based on a professional survey of the property and including an energy-efficiency assessment.

For leasehold properties, you will also have to include:

  • A copy of the lease. This will give details of how long it has to run, and of ground rent payable.
  • Most recent service charge accounts and receipts.
  • Building insurance details and payment receipts.
  • Regulations laid down by the landlord or managing agent.
  • The memorandum and articles of the landlord or management company.

Source: Office of the Deputy Prime Minister.

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